In many host countries, the fiscal system governing petroleum resource exploitation allows the State, represented by its National Oil Company (NOC), to participate in petroleum projects. A common form of said participation is via the ‘carry’, in which the contractor ‘carries’ the NOC through one or more stages of the project, effectively shouldering the latter's share of costs. In this way, the ‘carry’ resembles a loan to the NOC by the contractor. Like any other loan, this has financial implications, and can significantly impact the contractor's view of upstream project economics.

The ‘carry’ mechanism is an important yardstick that should be considered in comparative analysis of petroleum fiscal systems. In this paper, we assessed the impact of NOC participation on contractor value, using a sample of twenty-five fiscal systems. For each regime, economic models representing ‘carry’ and ‘no carry’ scenarios were constructed, and evaluated using seven economic indicators. We observed that the existence of ‘carry’ does not affect overall project viability, but, in most cases, it reduces contractor value. Furthermore, we found that ‘carry’ skews project risk towards the contractor, by increasing maximum capital exposure. Finally, by comparing two different measures of Government Take (a key measure of the attractiveness of a fiscal regime), we demonstrate that including‘carry'as part of Government Take results in an increase in the State's share of resource rent.

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